OMU to include solar in power supply portfolio

September 20, 2018

At its regular meeting on September 20, 2018, the Owensboro Utility Commission further expanded OMU’s supply portfolio by approving a contract to purchase 32 megawatts of solar power from Ashwood Solar I, LLC beginning in late 2022.

The Ashwood Solar I project, owned by a joint venture between MAP® Energy and Open Road Renewables, will be an 86-MW facility constructed on 800 acres in Lyon County located in Western Kentucky. The solar array will be among the top 2 percent largest solar power plants in the nation and nearly 10 times larger than the largest solar farm in Kentucky.

OMU cooperatively bid for renewable resources with the Kentucky Municipal Energy Agency, but signed its own independent agreement. KyMEA and its members will purchase the balance (62.5 percent/54 MW) of the power supplied by the solar project.

Solar power, as determined by the OMU Integrated Resource Plan conducted last year, provides an economically viable source of power and is a good fit for the utility’s overall portfolio. In addition, the availability of solar power also coincides with the utility’s summer peaking trend. The solar power contract term of 20 years adds additional flexibility to OMU’s portfolio considering the shorter duration of the Big Rivers agreement approved in June and the utility’s longer-term hydro contract with the Southeast Power Administration.

In a process that began in 2013, OMU has been carefully considering its future power supply, completing multiple integrated resource plans and additional studies to determine the best path to provide reliable and affordable power to our customer-owners. This extensive analysis was based upon several factors including the cost to OMU’s customers, reliability, and the ability to provide stable rates.

“The Owensboro Utility Commission has selected a portfolio that meets the needs of our community and our customers, while providing supply diversity and rate stability,” OMU Interim General Manager Kevin Frizzell said.

JT Fulkerson, Chair of the Utility Commission said, “Our supply portfolio reflects our commitment to providing affordable power for our community, while also providing flexibility in decision-making and long-term planning.”

The project is scheduled to begin operation in late 2022 and will include more than 300,000 solar panels capable of tracking the sun across the horizon. Construction will take approximately nine to 12 months to complete.

Open Road Renewables and its partner, MAP® Energy, bring vast experience in developing, financing, and operating solar and other renewable energy projects. Mike Volpe, Vice President of Open Road, said: “We are very pleased to partner with OMU to bring cost-effective power supply and economic development to Western Kentucky. OMU’s decision to diversify their portfolio with utility-scale solar validates the fact that emissions-free renewable energy can now compete with fossil fuels at a significant scale to deliver value to utilities and their customers. We look forward to working in partnership with OMU and other communities in the region to bring this project online.”

About MAP® Energy

MAP® Energy, through its joint venture with Open Road Renewables, initiated development of the Ashwood Solar Project in 2015. MAP® Energy is a leading investor in the development of renewable energy projects and has funded more than 10,000 megawatts of operating wind and solar generating capacity located across the United States. More information is available at www.map-energy.com.

About Open Road Renewables

Open Road Renewables is a utility-scale renewable energy development company focused on deploying least-cost renewable energy throughout the United States. More information is available at www.openroadrenewables.com.

OMU’s overall power supply portfolio

In its meeting on June 22, 2018, the OMU Utility Commission approved a contract to purchase power from Big Rivers Electric Corporation (BREC) as well as a recommendation to pursue the lowest-cost solar option provider as selected through a cooperative bid with KyMEA. These power options will be used in conjunction with OMU’s existing allocation of hydropower from the Southeast Power Administration.

BREC’s fixed-price proposal would provide full requirements purchased power supply beginning June 1, 2020 and continuing through 2026. This is the lowest cost and best proposal for OMU and its customers. Upon the implementation of this contract, OMU’s Elmer Smith Generating Station will cease operation on June 1, 2020.

Low power market prices driven by an abundance of natural gas and historically low gas prices, impending and current environmental regulations and the fact that OMU’s two coal power production units are aging contributed to the need to select an alternative power supply.

“OMU has owned and operated its own coal power production units since its inception over 100 years ago. Whereas this is a change both for the utility and our community, it is the most cost-effective option for our customer-owners. Throughout our analysis, it was very clear that continuing to own coal-powered facilities will continue to drive OMU’s rates up and is not in the best interest of OMU’s customer-owners,” explained Owensboro Utility Commission Chair J.T. Fulkerson.

“We arrived at this decision after a thorough analysis that began in 2013. We understand the gravity of the recommendation to change from self-generating to becoming a power purchaser, but the action taken by our Commission fulfills OMU’s mission of providing reliable and quality service at the most economical cost,” Kevin Frizzell, OMU General Manager said.

“While I am confident that this is the best option for OMU’s customers-owners, it is bittersweet for me because it also means that some fine people at the Elmer Smith Station will lose their jobs. We have a great group of employees out there and they have continued to serve with a high level of dedication and commitment throughout this time of uncertainty,” Frizzell added.

Why did OMU select a coal-fired power option instead of continuing to operate its own units?

Price was the primary driver in this decision along with reliability. It was clear from the IRP process that continuing to own and operate our current aging units was simply not economically feasible.

The BREC proposal includes the lowest risk as it provides:

Price certainly with a fixed price for the term of the agreement.

Flexibility for initiating the contract and allowing for the ESS shutdown.

An all-requirements option which is not limited to 175 MW if other portions of the portfolio do not come to fruition or are delayed.

Access to power supply backed up by BREC’s fleet of production facilities.

As we have seen the electric power business has changed significantly and is still changing. In addition, this shorter term power purchase agreement will allow OMU the flexibility to conduct another power supply option in a fairly short period of time without committing the majority of OMU’s supply portfolio for a long term.

How will these decisions affect rates?

The overall focus of our analysis and ultimately our recommendation was the cost impact to our customer. This portfolio was developed with the anticipation of stabilizing rates. Continuing to operate our own coal-fired production facilities would, according to extensive review, continue to increase rates for our customer-owners.

When do these contracts begin? End?

The contract with BREC would begin June 1, 2020 and continue through December 31, 2026.

OMU’s contract with Ashwood Solar I, LLC will begin in 2022 and is a 20-year agreement.

What happens when these contracts end?

Within the next 2-3 years, OMU will once again begin the IRP process to determine what is in the best interest of our customer-owners when these contracts end. This is an ongoing process.

What forms of power will you be purchasing?

Coal-generated, solar and hydro power will be parts of OMU’s power supply portfolio.

The coal-fired generation would be purchased from Big Rivers Electric Corporation. BREC’s fixed price proposal would provide full requirements purchased power beginning in 2020 through 2026. This is the lowest and best proposal for OMU and its customers. This proposal provides 175 MW, up to a maximum of 285 MW, from BREC’s generation fleet.

The solar option was evaluated in conjunction with efforts by KyMEA. OMU has agreed to purchase 32 MW of power from the Ashwood Solar I project located on 800 acres in Western Kentucky.

Hydro-power will be provided through our current Southeast Power Administration contract. OMU has an allocation of 26 MW. OMU is among several other municipal power companies to partake in the SEPA project located along the Cumberland River.

Where will the solar power be located?

The Ashwood Solar I project will be located on 800 acres in Western Kentucky and will include about 300,000 panels. This facility will be among the top 2 percent largest solar plants in the nation and the largest in Kentucky by a factor of nearly 10x.

Do we have ample transmission to support these power supply options?

OMU has initiated a transmission study to determine any system upgrades that may be required. Whether or not this will affect the contract timeline has yet to be determined. However, we do anticipate upgrades will be necessary.